Investing.com - The euro fell against the dollar on Thursday after posting strong gains in wake of the Federal Reserve's announcement that it will keep monetary policy loose and accommodative for a year longer than originally planned.
EUR/USD hit 1.3104 in early Asian trading on Thursday, down 0.02%, up from a session low of 1.3097 and off from a high of 1.3112.
The pair sought to test support at 1.2931, Wednesday's low, and resistance at 1.3121, Wednesday's high.
In the U.S., the Federal Reserve said it was leaving its benchmark lending target, the fed funds rate, unchanged at 0.25%, although markets were surprised to learn the Fed expects to keep that rate in place until the end of 2014.
Previously, Fed officials have said tightening wouldn't become more likely until late 2013.
The news sparked demand for the euro as the dollar sank in value although the greenback later regained some strength in Asian trading.
"Late 2014 is much longer than the market had expected and that’s why we’re seeing a negative U.S. dollar reaction,” said Brian Dolan, chief strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey, according to Bloomberg.
"They are assuring markets that rates will remain low, assure businesses that rates won’t go up soon and spur some economic gains."
The Federal Open Market Committee said in a statement that the economy has yet to gain enough speed to merit a change towards higher interest rates or other tightening measures.
"While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed," the Fed said in a statement.
"Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable."
While the Federal Reserve does not plan to roll out a third round of quantitative easing to stimulate the economy further, which would weaken the dollar, it won't rule out such a measure at this time either.
"The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability."
The Fed has overseen two rounds of quantitative easing so far, snapping up $2.3 trillion in assets such as Treasuries or mortgage-backed securities from banks with the aim of stimulating the economy.
Meanwhile, improved business confidence figures out of Germany also bolstered the euro, and markets were able to spend a session overlooking default fears in Greece.
Yet profit taking kicked in to bring the dollar back up from earlier lows.
The euro cooled against the pound as well as the yen, with EUR/GBP dipping 0.05% to 0.8368 and EUR/JPY slipping 0.04% at 101.91.
Later Thursday, markets will await U.S. durable goods orders, initial jobless claims and new homes sales, while consumer confidence figures come out of Germany.
In Japan, inflation and retail sales figures will publish as well.
The World Economic Forum continues its meeting in Davos, Switzerland, and markets will await comments from policymakers or financial and corporate leaders on the U.S. and European economies.
EUR/USD hit 1.3104 in early Asian trading on Thursday, down 0.02%, up from a session low of 1.3097 and off from a high of 1.3112.
The pair sought to test support at 1.2931, Wednesday's low, and resistance at 1.3121, Wednesday's high.
In the U.S., the Federal Reserve said it was leaving its benchmark lending target, the fed funds rate, unchanged at 0.25%, although markets were surprised to learn the Fed expects to keep that rate in place until the end of 2014.
Previously, Fed officials have said tightening wouldn't become more likely until late 2013.
The news sparked demand for the euro as the dollar sank in value although the greenback later regained some strength in Asian trading.
"Late 2014 is much longer than the market had expected and that’s why we’re seeing a negative U.S. dollar reaction,” said Brian Dolan, chief strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey, according to Bloomberg.
"They are assuring markets that rates will remain low, assure businesses that rates won’t go up soon and spur some economic gains."
The Federal Open Market Committee said in a statement that the economy has yet to gain enough speed to merit a change towards higher interest rates or other tightening measures.
"While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed," the Fed said in a statement.
"Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable."
While the Federal Reserve does not plan to roll out a third round of quantitative easing to stimulate the economy further, which would weaken the dollar, it won't rule out such a measure at this time either.
"The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability."
The Fed has overseen two rounds of quantitative easing so far, snapping up $2.3 trillion in assets such as Treasuries or mortgage-backed securities from banks with the aim of stimulating the economy.
Meanwhile, improved business confidence figures out of Germany also bolstered the euro, and markets were able to spend a session overlooking default fears in Greece.
Yet profit taking kicked in to bring the dollar back up from earlier lows.
The euro cooled against the pound as well as the yen, with EUR/GBP dipping 0.05% to 0.8368 and EUR/JPY slipping 0.04% at 101.91.
Later Thursday, markets will await U.S. durable goods orders, initial jobless claims and new homes sales, while consumer confidence figures come out of Germany.
In Japan, inflation and retail sales figures will publish as well.
The World Economic Forum continues its meeting in Davos, Switzerland, and markets will await comments from policymakers or financial and corporate leaders on the U.S. and European economies.